You can see in the way that Paul Ryan nods at Alan Greenspan’s answer that this is going in one ear and dribbling right out of the other. Given as Greenspan says, that the government cannot possibly run out of money to pay social security beneficiaries, and given that anything in the private sector can run out of money, then private investment accounts are obviously much less secure than federal government operated social security.

On Wednesday, members of the Senate Finance Committee will vote on the nomination of Charles Blahous, a Republican, to serve a second term as a public trustee for Social Security. Mr. Blahous, a prominent opponent of Social Security and the architect of President George W. Bush’s efforts to privatize benefits, is part of an army of aggressive conservative ideologues groomed for government service and bankrolled by the Koch brothers. Their purpose is clear — to tilt the game in Washington ever further in favor of corporate special interests. The Senate should reject them.

The travesty of this appointment is only partially revealed in what Elizabeth Warren wrote. She is enabling part of the travesty by not having the guts to tell us what she has chosen to hide from us.

That’s because Obama has taken the unusual step of renominating Blahous, a Republican, and his Democratic counterpart, Robert D. Reischauer, to second four-year terms as trustees. The Senate Finance Committee is scheduled to hold a confirmation hearing on the nominations Wednesday.

Come on Elizabeth, have the guts to tell us the whole story.

This is exactly my point when I say that Hillary Clinton would make a more dangerous President than Trump. Even “courageous” progressive “hero” Elizabeth Warren is afraid to tell us what role Obama is playing in this. If it were Trump renominating these people, she wouldn’t be afraid to tell us.

Why wouldn’t Elizabeth tell us the whole story? For someone we think has a lot of political courage, why is she carrying water for the neo-liberal Obama? Tell us the whole story, or sacrifice your reputation for having courage. OKAY, you had to compromise when you co-wrote this with Schumer, but you don’t have to keep up the pretense when you post this on your own Facebook page.

Chris Matthews held an episode of his Hardball College Tour at which he had a “conversation” with Bernie Sanders. Just like Republicans in Congress, Matthews peppered Sanders with a bunch of questions, but hardly gave him a chance to reply. In fact Chris Matthews was giving a speech, and Bernie Sanders was merely his foil.

I have an idea for how Bernie could have taken this as an opportunity to demonstrate one way for the political revolution to gain its voice, and start to control things. I’ll start my script with the actual words of the event. Then, at the appropriate moment, I will switch to the way it could have gone.

Here is the actual dialog as best as I can transcribe it. There is a lot of one person talking over the other, which is hard to transcribe. You will have to look at the videos, yourself to get a full understanding of how overbearing Chris Matthews is.

Chris Matthews: First, next January 20th and you can walk up to the senate you could you meet with the leadership and you say I have a program here. I want up to free, I mean government-funded, tuition for public universities. There’s things I want done on Social Security to increase benefits there’s things I want done on health care so it could become like Medicare for life. You’ve got very strong positions and Mitch McConnell looks at you the way he looked at President Obama and says forget about it.

Bernie Sanders: And then you know when I say, “Hey Mitch, take a Look out the window. There are a million young people out there who don’t want to be in debt for half their life for the crime of going to college and if you want to antagonize those million people and lose your job, Mitch. If you don’t want to lose your job you better start listening to what we have to say.” That’s the point. That’s how change takes place.

CM: How do you squeeze a guy like him.

BS: It’s not him, Mitch is, I know Mitch McConnell. He’s a smart…

CM: How do you squeeze 60 senators? You need 60 senators. You need 60 Senators.

BS: Let me tell you this. Absolutely, positively 100%. If we rally young people in this country to say, “You know what? Germany, Scandinavia, other countries, they have free tuition in public colleges and universities.” I have been all over this country because I talked to kids thirty, forty, fifty, $100,000 in debt, paying a huge percentage of their income. OK, young people stand up and say we are sick and tired of it. We don’t want to go into debt for our whole lives just because we got a college education. You know what? We’ll win that fight immediately. But the trick is not to appeal to Mitch McConnell. It’s to say, “Mitch, take a look at your emails coming in …

CM: What evidence do you have you have that this has worked for you? Have you increased the turnout in these elections? Have you increased the turnout in these elections? You’ve…

BS: We’ve done, look…

CM: You know, have you as a senator have you been able to get 60 votes of senators for anything? Have you ever been able to do this? What you are talking about doing.

BS: What I am …

CN: When you say you can get 60 Senators …

BS: I am not the President of the the … What I am saying, Chris…

CN: But what evidence do you have that you can do it?

BS: What evidence do I have? The evidence that I have is the only way changes in this country that’s the only way change is about in this country. That’s what the civil rights movement was about. That’s what the women’s movement, the gay movement. That’s what it is about.

CN: It’s necessary, but is it sufficient?

BS: That’s the way …

CN: But is it sufficient to get it done? These guys run in their own states with their own conservative constituencies that will say fine Bernie Sanders a liberal President ..

BS: Let me give you an example …

CN: He’s a progressive. I am not one who will vote against him..

BS: Let me give you a good example …

CN: How do you know you can do it?

BS: How do I know? I don’t know anything. I think we do the best that we can do. We try, but

BS: You look at it inside the beltway. I am not an inside the beltway guy. I am an outside the belt way guy …

CN: But the people who vote on taxes are inside the beltway ..

BS: and those people are going to vote the right way when millions of people demand that they vote the right way. On this issue I have no doubt that as president of the United States I can rally young people and their parents to say that if Germany does it, Scandinavia does it, countries around the world do it, we can do it and yes we bailed out Wall Street …

CN: Can you [inaudible]…

BS: It is Wall Street’s time to help the middle class.

CN: The next Senate leader, Democratic leader, probably Chuck Schumer of New York. Can you deliver his vote tonight? can you tell me one Senator that is gonna follow you for these proposals? They’re all good, decent proposals. In fact they are moral proposals. Tell me the votes. Who’s going to vote with you. You say I will give you 60 votes.

BS: I know Chuck very, very well…

CN: Is he going to vote with you?

BS: Well, call him up. I don’t know. …

CN: Give us one vote? You say I will give you 60 votes and pass
it …

BS: Chris, Chris …

CN: and you can’t give me one vote.

BS: I didn’t say …

CN: One vote. Your vote, but your not going to be in the Senate anymore.

BS: I didn’t say I couldn’t give you one vote. Look what you’re not catching on. I have to say this respectfully. You are a nice guy. You are missing the point. Alright, you are missing the point. if you look at politics today is a zero sum total. If you are looking at sixty-three percent of the American people not voting, eighty percent of young people not voting, billionaires buying elections – you’re right! I’m not looking at that world. …

CN: How’s that going to change on the day you are in office? You won’t have a Supreme Court on your side.

BS: What I will have is millions of people …

CN: You are going to need 60 votes to get a Supreme Court nominee.

BS: OK, you are going around in circles.

Now here is where I would start rewriting the script.

BS: Chris, I know how to fix the problem we are having here. Let me give you a demonstration right here, on how the political revolution works.

[Bernie Sanders turns to the audience and says]

BS: Are you going to just sit there and listen to this guy try to outshout me, and cut off any ability I have to explain my plans? Or are you going to help me by shouting “Let Bernie Speak” very time Chris tries to cut me off? It is time for you to tell the powers that be that you aren’t going to take this anymore. You don’t have to be a passive audience to the travesty going on here. Let’s hear it for a two sided conversation.

Read the rest of this post to understand the magnitude of the deception that Third Way is pushing.

The Naked Capitalism article said:

As Altman goes on to point out, Third Way isn’t even playing straight on the benefit side, to say nothing of ignoring the tax side. The report breaks beneficiaries into quintiles based on average lifetime income.

This made me suspicious that Third Way was using a particularly egregious ploy that few people will understand the depth of the deception unless they think about it a little more deeply.

I went to the original article to see if it was more explicit about this trick. There is a section in that original article:

The only way to even plausibly make the case that the Sanders proposal disproportionately favors the rich is to obscure the facts.
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Instead of using dollar figures to analyze to whom the new benefits go, the report refers to “quintiles.”

These numbers can be converted into another way to look at the wealth imbalance per capita. Per capita, the top 0.1% have almost 900 times the wealth that the per capita bottom 90% have. This multiplier of 900 is only for an equal distribution of total wealth between the top 0.1% and the bottom 90%. There is no upper limit on the ratio of what the top can have compared to the bottom. As more and more of the wealth gets concentrated at the top, the multiplier goes up without limit.

This is decidedly not the case when you talk about money received from Social Security in retirement. The top payment from Social Security does not go up without limit. The ratio between the top payment and the minimum payment does not go up without limit. Even if the top payment were 10 times higher (I think an overestimate) than the minimum payment and all the lower 99.9% got the minimum and all the top 0.1% got the maximum, the ratio of total dollars per segment of the population would be [10 X ( 1/1009 )] : [1 x (999/1009)]. This is 0.99% going to the top 0.1% and 99.0% going to the bottom 99.9%.

To summarize the comparison – the top 0.1% of Americans have almost as much wealth as bottom 90% , and, with some pessimistic assumptions about the unequal distribution of Social Security pension benefits, the top 0.1% would get 0.99% of the benefits and the bottom 99.9% would get 99.0% of the benefits. If you took all the skew out of the Social Security payments, the bottom 99.9% would hardly see any difference. If you took all the skew out of the wealth distribution, the bottom 90% would see their wealth double.

I doubt you could have guessed that the Social Security payments could possibly be this minimally skewed compared to the wealth distribution. This is an indication of the magnitude of the deception promulgated by Third Way.

A new paper by economist Lance Taylor for the Institute For New Economic Thinking’s Working Group on the Political Economy of Distribution takes on the way economists have looked at wealth and income inequality.
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LT:

The existing social order does not necessarily guarantee that the rich will get richer (remember Keynes on the essential uncertainty of the future). But even if they do, a stiff tax on capital gains could be used to build up a socially-oriented wealth fund that would help offset that.

Look at Norway’s “oil fund,” which takes a cut of petroleum revenues and invests the money while giving a small annual pay-out from its investment returns. An example closer to home is California’s CalPERS retirement fund. The key point is that such funds can save at a higher rate than wealthy households, amassing market power and potentially using capital income for social purposes.

In the labor market, real wages of employees have lagged productivity growth, which is why the profit share for the boss has gone up. Outsourcing has played some role, but policies and legal interpretations (think of so-called “right to work” legislation and attacks on public sector unions) that reduce labor’s bargaining power have been more important. Recreating that power could reverse the trends and slow the accumulation of wealth. Our studies and others suggest that simply raising taxes on the rich and transferring the proceeds downward in the income distribution will not have a large immediate effect on distribution, but the impacts could cumulate over time.

It’s possible to reduce U.S. wealth and income disparity, but reversing the trends of the past 30 or 40 years that got us there will not be easy or quick.

Of course I would like this article. It substantiates a lot of what I have been writing on this blog. Just because I suffer from confirmation bias, doesn’t mean that the article is wrong, though. It is just possible that my ideas really are close to correct.

The talk about Norway’s “oil fund” demonstrates what I think are the benefits of having large parts of the Social Security Trust Fund invested in the stock market. California’s CalPERS retirement fund is just another example. Admittedly CalPERS management has gone off the rails a bit in recent years as documented by the Naked Capitalism web site. That just means we need to develop better control mechanisms for the Social Security Trust Fund when it gets into stock market investing.

I have come to a set of expectations for books of this type. The really good ones do a great job of identifying a problem, providing new ways to analyze the problem, and new ways to explain the problem clearly for the rest of us to understand. This book does all that, so I rate it really good.

These books always have a small part at the end that tell us what to do about the problem. These are universally the weakest part of the books. Most of the books do tell you what needs to be changed, which of course is pretty obvious from the excellent description of the problem. No book that I have read so far tells you any practical way to bring about the change.

Robert Reich’s book goes farther than many books because he doesn’t just tell us that people have to act differently from the way they have ever acted before. He does go through some specific rules of the market that need to change, and he does describe some ways of reorganizing the meaning of basic economic entities such as corporations. What he cannot do, and therefore does not do, is to explain how we wrest power from those who now wield it in such a way that we can never seriously contemplate how to make the changes that he says we need.

The robots of the future, along with other breakthrough technologies, will not exactly take away “common property” for which citizens deserve to be indemnified. But they will take away good good jobs that are already dwindling in number and replace opportunities already growing scarce. They will, in short, supplant the middle class that has been the centerpiece of our economy and society that is already shrinking. New market rules that cause wealth eventually to revert to the public domain rather than compound for future generations that had nothing to do with creating it, and be used instead to finance a minimum guaranteed income for all citizens, is one way to go.

This and some other ideas he discusses are starting to be tried in some places around the world, so it is not as if they are completely outside of the realm of possibility. I should give Reich more credit for bringing these ideas to the fore in a book that may be more widely read than other sources that discuss these ideas.

What strikes me is that there is a transition step that I think is more easily made, and I do not see even mentioned. The idea has been described and thoroughly researched by Franco Modigliani and Arun Muralidhar as described in several posts on this blog, but even they shied away from the deeper implications of their proposals. Possibly they downplayed these implications for fear that it would be too upsetting to the 0.01% if they were to understand what the implicatons were.

I am talking about changing the Social Security Trust Fund investment rules so that the trust fund could actually buy shares of corporations. The premise is that the trust found would have far better returns than the Treasury bonds they must buy now. With better returns, the trust fund could both do with less money being taken in from taxes, and it could safely pay higher benefits. This is the surface meaning of this idea.

The deeper implication is that an arm of our government, The Social Security Trust Fund, would own a very large part of the private corporations, given the size of the trust fund. Rather than be passive investors, the trust fund could be active in demanding that corporations pay more attention to the needs of the whole society. The trust fund as a major shareholder would do that because the trust fund has that basic responsibility to society as a whole. This is unlike private investors who have only their own best interests at heart.

Moreover, the fact that the Social Security Trust Fund was growing because of the growth of corporations would in itself be a sharing of the benefits of increasing productivity which sharing is not going on now.

This idea of starting to invest the trust fund in corporate shares is something that could start small, and grow over time. The transition could be so gradual, that people would hardly notice the impact until it had grown substantially. It would also have the benefit of changing its course if unforeseen side-effects started to appear.

As the size of the investment grew, the incentives for corporations would change. The income inequality between top executives and average workers would start to get controlled in a way that no group of small investors can cause. The funding by corporations of buying elections and elected officials to rig the system for their benefit could be brought under control. This change in wealth and income distribution, and diminishing of political power and influence would make it easier to make Reich’s more far reaching changes possible.

If the public understood these changes this way, they might be far more apt to strongly support them. Of course the people with the power now would also understand, and they would fight these ideas more fiercely. It is then a question of whether or not the power of an idea could overcome the power of the money. I think history shows that sometimes this can happen.

Prof. Wolff is an expert on Socialism, so he does a good job explaining many things about Bernie Sanders and Socialism. The excerpt below isn’t necessarily his best words, but they are an introduction.

To see just how big the disconnect is on the surface, consider this: Although nearly half of Americans say they wouldn’t vote for a socialist, Sanders not only gained campaign contributions after the first Democratic primary debate, some online polls and focus groups declared him the winner.

In other words, plenty of people like Sanders’ ideas, if not the “socialist” label.

In a purely socialist economy, the public (read: the government) controls the means of production, and revenue is shared with everyone. In a capitalist system, individuals control the means of production and can, if they choose, keep all of the income.

Most governments, regardless of how they describe their countries, fall somewhere in between.

There are two statements in the article that I think are way off the mark however.

3. — Social Programs. While the U.S. already offers programs like Medicare and Social Security that fall outside a purely capitalist system, Sanders said he would push for more, like child-care and pre-kindergarten programs, and expand Social Security. Admittedly, the only way such programs would be approved by a Republican-controlled Congress is if Americans insisted on them, he said.

The drawback: “Congress has no resources of its very own,” said Williams. “That money coming out of Washington to pay for health care, food, housing, does not represent Congress reaching into their own pockets to send that money out.”

The last paragraph in the excerpt above quotes Dr. Walter Williams, an economist at George Mason University. There are several other ignorant statements in the article by Williams prior to this one. Dr. Williams fails to mention that money coming out of Washington to pay for health care, food, housing is created by the independent government entity known as the Federal Reserve Bank. Don’t argue with me over whether or not the FED is a part of the government. I have the evidence to prove you wrong.

The second item I take issue with Prof. Wolf is the following:

Socialism, on the other hand, attempts to create equal opportunities. It redistributes money from the wealthy to the poor and middle classes to bridge the income gap, largely by taxing the rich at a higher rate.

Under the current circumstances the redistribution of wealth is from the wealthy, who stole it from the middle-class and poor, back to the people from whom it never should have been allowed to be stolen in the first place. In other words the money being redistributed is money that rightfully belongs to the middle-class and the poor because it was taken from them by fraudulent means. Hey, middle-class and poor people, it’s your money, do you want it back, or should we let the rich keep it?

Poor and middle class people, the 99%, have no control over their rent or mortgage, no control over their bank, their utility company, their insurance company, children’s school, place of employment, or a host of other institutions that shape their life. Political parties are asking people to believe that once a year they can go into a booth, press some buttons, and materially affect their life. Nothing in their experience in life suggests that this simple act will have real consequences. So how can party activists at the local level change that? Well, it would be nice if Democrats who won elections didn’t instantly turn around and start attacking Social Security and other institutions crucial to the well being of the 99%. But even in the face of that sort of betrayal, there are things that local activists can do to drive up turn out.

If the above excerpt doesn’t give you enough incentive to follow the link to her article, then I don’t know what will.

Here is the way I look at the current USA socio-economic-political system. Bernie Sanders is merely trying to get a better balance by shrinking the rigged-market capitalism, and increasing both the fair-market capitalism and the democratic socialism. He certainly is not in favor of dictatorial socialism.

Notice that there is no category that has the word “free” in its name.

October 25, 2015

When I originally posted this, I did not publish the text of an article i was working on for fear that all the verbiage would cloud the point I wanted to make. Using some suggestions from Brian Selden, I think the article has been clarified a bit. Moreover, without some of the words, some of the point is lost. So here it is.

New Terminology for Socio-Economic-Political Systems

We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America.

The Democratic Socialism in the USA is part of promoting the general welfare. No other part of the Socio-Economic-Political system as described below has this mandate as its primary focus.

To explain what Bernie Sanders means by Democratic Socialism, we need to put that term in context with three new terms. The three new ones are Dictatorial Socialism, Rigged-Market Capitalism, and Fair-market Capitalism. There is no category with the word “free” in its title.

First I’ll describe what the Democratic Socialism of Bernie Sanders means to me. My simple explanation is that democratic socialism is the realization that people banding together in the form of government can accomplish some things better than the private sector can. To make sure that there are checks and balances on the power of government, we use democracy to run the government. With this definition of democratic socialism, it seems fairly obvious to me that the USA has always been a mix of democratic/socialism and various flavors of capitalism from its very inception. The proportions in the mix have varied over time.

How can you tell which things are the most likely to be best performed by government? The things where the overall welfare of the people is the main measurement of success, and profit is not the main measure.

For purposes of illustration we can think of the current Socio-Economic-Political system of the United States of America apportioned very roughly as something like the following pie chart of Figure 1. I think that Bernie Sanders’ main point is that the current balance among these sectors is way out of whack. A balance of the blue and the green, with minimal red and yellow would be preferable to what we have.

Figure 1: Rough Makeup of the Current USA system

One of the points of the pie chart is to say that our current system already has a large dollop of Democratic Socialism. Below is a list of some things that you might think of putting in that category that we already have

Let us round out the discussion by mentioning what might be in the other categories. You might notice that some people in our country experience some of these activities being in a different category from the experiences of majority, male, white, European descended, Christian, heterosexual citizens.

Fair-Market Capitalism

Small businesses

Worker co-ops

Local banks

Workers e.g. unionized, non-union

Rigged-Market Capitalism

Big banks

Multinational and other large corporations

Hedge funds

Tax loopholes for corporations and the rich

Easy bankruptcy for the rich, tough bankruptcy for the rest

Trade agreements solely for the benefit of the rich and their corporations

Stiff penalties for petty crime, but no penalties for white-collar crime on a massive scale

Student loans with tougher rules on the borrower than on borrowing for any other reason

Deregulation of all sorts corruptly bought and paid for by the formerly regulated

Corporate capture of the agencies intended to regulate them

Money in politics and corruption of elections

Supreme Court that gives imaginary rights to the rich and the powerful while they deny real rights to the rest

Patent and copyright protection way beyond what was intended in our Constitution

No worker protection for undocumented worker, for workers in “right to work” states, undermining the purpose of the NLRB.

Elimination of enforcement of anti-trust laws

The press and the media controlled by a small number of large corporations and the wealthy

For the next category we have to look outside our country for most of the examples. Some of these are examples of what people in the USA have been taught to think of when they hear the word socialism in any context. Dictatorial Socialism is generally characterized as having all important decisions made by a very small number of people over which the large majority of the population have no control.

Dictatorial Socialism

Military draft – were it to be reinstated in the USA

Unions with too much power – already eliminated in the USA

Government ownership of all industries and companies with no competition allowed

The article highlights the less obvious ramifications of the changes in the employment environment.

For all these reasons, the upsurge in uncertain work makes the old economic measures – unemployment and income – look far better than Americans actually feel.

It also renders irrelevant many labor protections such as the minimum wage, worker safety, family and medical leave, and overtime – because there’s no clear “employer.”

And for the same reason eliminates employer-financed insurance – Social Security, workers compensation, unemployment benefits, and employer-provided health insurance under the Affordable Care Act.

In the article, Reich identifies several government programs that will have to be adjusted in major ways in response to the changes in how people are employed. We need political leaders who are aware of the need for this major shift and what it says about the government programs that they enact and administer. It is not enough to talk about what we did in the past. We need new ideas.

We should judge people running for President in the upcoming election in 2016 by the boldness of their vision. Anything less will just not be enough to address our future needs.